Question

Laker Company reported the following January purchases and sales data for its only product. Units Acquired at Cost 145 unitse $7.00 - $1,015 Units sold at Retail Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Jan. 20 Purchase Jan. 25 Sales Jan. 30 Purchase Totals 70 unitse $6.00 - 105 units e $16.00 420 $5.50 - 85 units 190 units 405 units $16.00 1.045 $2.480 190 units The Company uses a perpetual inventory system. For specific identification, ending Inventory consists of 215 units, where 190 are from the January 30 purchase, 5 are from the January 20 purchase, and 20 are from beginning inventory Required: 1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,300, and that the applicable income tax rate is 40% (Round your Intermediate calculations to 2 decimal places FIFO LAKER COMPANY Income Statements For Month Ended January 31 Specific Weighted Identification Average $ 3,0401 $ 3,040 1,265 1,775 3 ,040 1,300 1,300 475 1.740 90 $ 285 $ 1.740 $ L $ IFO 3,040 3,040 Sales Cost of goods sold Gross profit Expenses Income before taxes Income tax expense Net Income 3,040 1,300 1.740 3,040 1.300) 1.740 $ 1,740 $ 1,740

Answer 1

Comparative Income Statement for the month of January Weighted average FIFO LIFO Specific Identification ($) 3040 1265 1775 1300 475 190 285 Sales Cost of Goods Sold Gross Profit Expenses Income Before Taxes Income Tax Expense Net Income 3040 1163.37 1876.63 1300 576.63 230.652 345.978 3040 1285 1755 1300 455 182 273 3040 1260 1780 1300 480 192 288

Calculation of Cost of Goods Sold 1) COGS weighted average method Weighted Average Cost per Unit = Total Cost / Total Units purchased = 2480/405 = 6.12 COGS Valuation = = 6.12 x 190 1162.8 2) COGS under FIFO 105 units x $7 = 40 units x $7 45 units x$6 = 735 280 270 1285

420 3) COGS under LIFO 70 units x $6 = 15 units x $7 = 105 units x $7 = 105 735 1260